How proximity turns passive shareholders into active voters
New research finds foreign mutual funds vote against management far more often once a company expands operations into their home market
Foreign investors now hold a record share of the world's listed companies, yet a growing body of evidence suggests many of them do not know enough about what they own to vote on it properly.
Global cross-border portfolio investment reached US$89 trillion by June 2025, up 11.6% in six months, according to the International Monetary Fund's Portfolio Investment Positions survey, with equities making up 57% of that total (an implied US$50.7 trillion, calculated from IMF data). Every dollar of that sits inside a portfolio that a stewardship team, somewhere, is meant to research and vote on, company by company, market by market.
BlackRock's investment stewardship arm shows the size of that job. In 2025, its team voted at 16,593 shareholder meetings on more than 154,000 proposals across 53 markets, according to its latest Investment Stewardship Annual Report. Similarly, Vanguard's investment stewardship team voted on 190,710 proposals at 13,432 companies across 39 countries over the same period, engaging directly with 1336 companies representing 66% of equity assets under management, according to Vanguard's 2025 Investment Stewardship Annual Report.
Stretched stewardship teams and voting patterns
The sizes of these portfolios present a resourcing challenge for such funds. BlackRock, Vanguard and State Street each hold shares in more than 10,000 companies, according to previous research, which also found they employ stewardship teams of just 45, 21 and 12 people respectively to oversee governance across those portfolios. BlackRock’s team has since grown to 65-plus professionals, according to its most recent report (Vanguard and State Street do not mention updated headcounts in their latest reports).
These numbers raise important questions. Fund managers carry shareholder voting responsibilities across portfolios spanning dozens of countries, but do they have adequate resourcing to match – and what are the implications for the quality of investment decision-making? New research published in the Journal of Financial and Quantitative Analysis examines these issues and explores what happens to a fund's voting behaviour once the distance between it and a company it invests in changes.
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The paper, Operational Proximity and Cross-Border Shareholder Monitoring, authored by Professor Fariborz Moshirian in the School of Banking and Finance at UNSW Business School, Professor Peter Pham from the University of Sydney's Discipline of Finance, and UNSW Business School PhD Alumni Jenny Jihyun Tak from the University of Manchester's Alliance Manchester Business School, notes that institutional investors are required to vote on the companies they hold.
However, voting well requires particular information – which does not always travel easily across borders. Language barriers, unfamiliar disclosure regimes and physical distance from company operations restrict what a foreign fund can learn about a business before it votes. Left with limited capacity to research every holding, funds default to voting 'for' whatever management proposes. In the data underpinning this study, that default vote accounts for 88% of all votes cast.
Tracking nearly two decades of voting records
To test whether proximity changes this default, the researchers turned to US mutual funds, which are required by the Securities and Exchange Commission to disclose every vote they cast on portfolio companies, including those based overseas. The team merged these voting records, sourced from ISS Voting Analytics, with a separate dataset tracking when non-US companies establish subsidiaries or make acquisitions inside the US. The combined sample covers 16,360 companies from 46 countries and voting outcomes between 2003 and 2018.
"Fund managers carry shareholder voting responsibilities across portfolios spanning dozens of countries, but do they have adequate resourcing to match?"
This approach isolates if a company already sitting in a US fund's portfolio decides to set up operations in the US, while another company in the same portfolio does not. Because the comparison sits within the same fund and the same portfolio over time, it strips out the reasons a fund chose to invest in a company in the first place, isolating the effect of proximity on voting behaviour rather than on investment selection.
When operations move closer, dissent rises
Once a foreign company establishes a US presence, the US funds holding its shares become measurably more willing to vote against management. The probability of a fund casting a dissenting vote rises by up to 0.9 percentage points: an 8% increase on the underlying rate of dissent. This pattern remains the same even after controlling for company performance and governance ratings, and applies whether the US entry comes through acquisition or a new subsidiary.
Three further findings point to genuine information gathering rather than a mechanical response to worse results. Dissent rises fastest on proposals covering operational matters such as major investment decisions, where specialist knowledge of the business is most valuable, rather than on routine items like auditor appointments. It is strongest in closely contested votes, where individual votes carry the most weight.
And funds' votes increasingly diverge from proxy advisor ISS recommendations and from the outcomes of the overall shareholder vote, indicating that funds are forming their own view of a company rather than following other shareholders' lead. As the authors write in the paper, “the increase in dissent voting is consistent with funds becoming more engaged shareholders as they gain better information.”
Weak governance markets benefit most
The effect is strongest in countries with weak legal protection for minority shareholders, and weakens where media scrutiny, analyst coverage or US cross-listing already supply outside information. Proximity substitutes for governance infrastructure that is otherwise missing. The researchers also point to a governance payoff: companies that draw heavier dissent from US funds subsequently bring forward fewer proposals likely to face shareholder opposition, pointing to a disciplining effect on management behaviour.
Key takeaways for business professionals
For company boards, expanding into a foreign market changes how existing overseas shareholders scrutinise every future vote. Boards should expect that scrutiny to fall hardest on proposals tied to the operations themselves, major investment decisions, capital allocation and any close-call item, rather than routine matters such as auditor appointments. Further, the research suggests this attention builds over several years rather than fading after the initial announcement.
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For investor relations teams operating in markets with weaker shareholder protections, that scrutiny is likely to intensify further. Disclosure and engagement strategy should be built accordingly. Because funds in this position increasingly form independent views rather than following proxy advisor recommendations, clear and timely disclosure around new overseas operations carries more weight with these shareholders than it once did. It is worth building this into the market entry timeline itself rather than seeing it as a governance task for later.
For institutional investors, the findings suggest that portfolio companies setting up local operations warrant a redirection of stewardship attention, since that is where information advantages (and monitoring capacity) are easiest to establish. Funds with limited stewardship staff can use a company's local footprint as one practical resource for where research and engagement effort is likely to be best rewarded.
Five recommendations for industry professionals
- Boards planning market entry should review shareholder voting history in advance, since operational expansion is linked to increased scrutiny from existing investors.
- Investor relations teams should strengthen disclosure practices ahead of a market entry, particularly around operational and capital-related proposals, where dissent increases most.
- Companies operating in markets with weaker minority shareholder protection should treat foreign market expansion as a governance event, not only a commercial one.
- Institutional investors should reassess stewardship resourcing when a portfolio company changes its operational footprint, since that is when monitoring capacity delivers the most value.
- Governance and legal teams should track proxy advisor recommendation gaps over time, since divergence from those recommendations is an early indicator of investor attention.